Since a fragile six-month ceasefire ended last Friday, more than 200 rockets and mortar shells have been fired at Israel, causing damage but few injuries. During the same period, six Palestinian militants have been killed in Israeli attacks in the Gaza Strip.

Israeli premier Ehud Olmert insisted he did not want war, but told Arab TV station Al Arabiya: 'Hamas must be stopped - that is the way it is going to be. I will not hesitate to use Israel's might to strike Hamas and Islamic jihad (holy war).'

Israeli defence minister Ehud Barak warned that the militants in Gaza would pay a 'heavy price' if they continued to target Israel.

A Palestinian boy holds an umbrella as others wait in line to buy bread in Gaza on Christmas Day

Defence officials said the Israeli operation would likely begin with surgical airstrikes against rocket launchers and continue with a land invasion.

On Wednesday, Palestinian militants pummeled southern Israel from Gaza with more than 80 rockets and mortars, and another dozen or more were fired yesterday.

Issuing what amounted to a public call to Gazans to overthrow their Hamas leaders, Mr Olmert questioned whether Hamas's aggression was consistent with Islam and said: 'I say to you, in a last-minute call, stop it. You, the residents of Gaza, can stop it.'

Palestinian boys take part in a protest in Gaza in support of Ahmed Saadat, leader of the Popular Front for the Liberation of Palestine

But there is little doubt Hamas has a firm grip on Gaza and faces scant opposition there from Mr Abbas's secular Fatah faction, following a brief civil war last year.

In Gaza, Hamas spokesman Fawzi Barhoum said Israel would 'pay the price' for any attack.